Back to top

Bull of the Day: Spirit Airlines (SAVE)

Read MoreHide Full Article

Spirit Airlines (SAVE - Free Report) just gave bullish revised fourth quarter guidance. This Zacks Rank #1 (Strong Buy) is at new 52-week highs as earnings are expected to jump by the double digits in both 2018 and 2019.

Spirit Airlines is a low cost airline that operates 500 daily flights to 70 destinations in the US, Latin America and the Caribbean.

Raised Fourth Quarter Guidance

On Nov 26, Spirit raised its fourth quarter total revenue per available seat mile (TRASM) by 5 points to 11% year-over-year versus its initial guidance of about 6% year-over-year.

The big boost is primarily being driven by higher non-ticket revenue and higher load factor expectations. The non-ticket gains were in its new dynamic pricing on seats, bags and bundled service offerings.

The company's recent network re-alignment, and its initiative to optimize peak and off-peak scheduling, has also resulted in higher-than-expected load factors.

It also believes that a stronger industry environment, especially around the busy peak travel periods, is contributing to some of the improved revenue outlook.

Lower Fuel Prices a Boost

Additionally, the sudden November plunge in crude prices is going to boost EPS in the fourth quarter dramatically as well.

In its third quarter earnings update in October, Spirit gave guidance on fuel cost per gallon of $2.46.

On Nov 26, it revised that downward to just $2.27.

Estimates Revised Up for 2018 and 2019

The analysts are bullish on the end of the year and the outlook for 2019 with the duel market conditions of lower fuel costs and higher RASM.

9 analysts have revised their 2018 estimates in the last 30 days, with one even revising it higher in just the last week.

The 2018 Zacks Consensus Estimate has jumped to $4.22 from $3.66 during that time. That's earnings growth of 26% as the company made just $3.33 in 2017.

2019 looks solid as well with 8 analysts raising estimates, pushing the 2019 Zacks Consensus up to $5.47 from $4.51 over the last month. That's earnings growth of another 30%.

Shares Hit New 2-Year High

While the rest of Wall Street was mired in the red, Spirit shares have been soaring.

They've gained 39.3% year-to-date and are hitting new 2-year highs.

Spirit still has an attractive forward P/E of 15, although, for an airline stock, that's a little pricier than competitors like Southwest Airlines (LUV - Free Report) , which trades with a forward P/E of just 12.7, or United Continental (UAL - Free Report) , which sports a forward P/E of only 10.7.

For investors looking to get back into the airline stocks, Spirit is one to keep on the short list.

More Stock News: This Is Bigger than the iPhone!                   

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.  

Click here for the 6 trades >>

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

United Continental Holdings, Inc. (UAL) - free report >>

Spirit Airlines, Inc. (SAVE) - free report >>

Southwest Airlines Co. (LUV) - free report >>

More from Zacks Bull of the Day

You May Like